vulnerable households
Taking all these findings into account, there is a need to re-launch support measures that were undertaken in 2020 and that came to an end with the culmination of the financial year. As discussed earlier, the Union Budget for 2021-22 did not make any provisions for expanded PDS, MGNREGA, cash transfers or other relief measures (Basole 2021a). But seeing the current situation, the Union government announced, on April 23, 2021, that the PM Garib Kalyan Anna Yojana, providing an additional five kgs of grain free of cost to priority households, will be restarted for the months of May and June.6 Much more can be done, however, in the immediate future including:
• Extending free rations under the PDS beyond June 2021 until the pandemic is brought under control.
• Cash transfer of I5,000 for three months to as many households as can be reached with the existing digital infrastructure, including but not limited to Jan Dhan accounts.
• Expansion of MGNREGA entitlement to 150 days and revising programme wages upwards to state minimum wages. Expanding the programme budget to at least I1.75 lakh crores.7
• Launching a pilot urban employment
programme in the worst hit districts, possibly focused on women workers.
• Increasing the central contribution in old-age pensions to at least I500.
• Automatically enrolling all MGNREGA workers who do construction work for a stipulated period as registered workers under the Building and Other Construction Workers (BoCW) Act so that workers can access the social security benefits available to the latter.
• A Covid hardship allowance to 2.5 million Anganwadi and ASHA workers of I30,000 (5,000 per month for six months).
The above measures, of course, have implications for the fiscal deficit and the debt-GDP ratio which are currently at historic highs. We discuss this issue in the final section of this chapter. We now elaborate the first four points mentioned above.
those who have been left out of the system, either because of targeting problems or due to lack of portability of benefits, have suffered greatly. Two clear policy priorities have emerged from the crisis, allowing inter-state portability of entitlements and at least a temporary universalisation of the system by eliminating targeting.
The argument for allowing beneficiaries to avail of their entitlements wherever they work or reside currently, and not only in the towns or villages where they are domiciled, is clear and has been emphatically underlined by the migrant worker crisis. This process is underway with the One Nation One Ration Card policy which now includes 17 states.8 But a more significant step in the direction of improving food security is a move from a targeted to a universal programme. This demand, though of old provenance, has been renewed with force in the current juncture.9 As we observed in Chapter Six, nearly 90 million poor households are estimated to be left out of the NFSA list. As a result, during the pandemic, several states extended their beneficiaries list as well as commodities provided, beyond the scope of the NFSA. A leading example here is Tamil Nadu, which has a universal system and also provides pulses in addition to cereals.
The principal objections to a uniform universal system (where entitlements remain the same regardless of the level of household income) are
its overall cost and the subsidy accruing to households who do not need it. On the other hand, a targeted system in a data-poor ecosystem such as India’s can cause significant exclusion errors.
The practical solution to this dilemma has been to move to a
Two clear policy priorities have emerged from the crisis, allowing inter-state portability of entitlements and at least a temporary universalisation of PDS by
eliminating targeting.
8. Policy recommendations for the short and medium term
universal system in which all households are part of the system but receive different entitlements in a graduated fashion (e.g. Pondicherry). The option to self-exclude or opt out of the entitlements is also worth considering, as has been tried recently for the LPG subsidy.10 Such a system can sidestep the problems of arbitrary thresholds that end up excluding deserving households entirely.
b. Enhancing Direct Income Support
Cash transfers, via Jan Dhan accounts, were an important part of the PMGKY package. But as we have shown in this report, the coverage was low and the quantum was vastly inadequate compared to the magnitude of the shock. Larger transfers delivered to a larger proportion of vulnerable households, are urgently needed.
As noted in previous chapters, the case for larger cash transfers is also strengthened by looking at what has happened in other developing countries.
For India, with a per capita GDP of approximately I13,000 per month, a cash transfer of I6,000 would be equivalent with what has been undertaken in other lower-middle income countries. While this would not compensate households for the entirety of lost income, it is still better than what has been done so far.
There are, of course, several challenges in the implementation of direct cash transfers as we have discussed earlier (Drèze and Khera 2020). The most urgent need is to expand the net. In addition to increasing enrollment under the PM Jan Dhan Yojana, the use of databases from existing programs
is a strategy worth exploring given the urgency.
These can include MGNREGA rolls, pension schemes, Ujjawala databases, ration cards, and possibly even ID cards or licenses such as those issued to drivers or street-vendors. Bank accounts will already be verified and linked to Aadhar for many of these beneficiaries.
It is worth remembering that there are many who may have had incomes that place them well above any poverty line, but who have lost employment or have witnessed a sharp decline in their incomes. They too will need income support till economic activity resumes some degree of normalcy. Some may have drawn upon PF savings or other formal mechanisms to tide over the crisis, but this option is not available to all such workers. Identifying such individuals is no doubt a large task, but creative ways of reaching out to them need to be thought through quickly.
The principle is to ensure as wide an infrastructure as possible to deliver cash relief.
c. Strengthening MGNREGA
We have seen in previous sections, that MGNREGA has proved to be a vital safety net in rural areas, in particular for migrants returning to their homes.
An important aspect of the programme is that it overcomes the problem of targeting and reaching the relevant population through its self-targeting mechanism of beneficiary selection. Going forward, with mobility restrictions back in force, many firms still facing bankruptcies, and reverse migration once again occurring on a large scale, strengthening the functioning of MGNREGA and introducing an urban employment guarantee programme should both be made policy priorities. Physical distancing forms and other precautions will, of course, need to be put in place for worksites to function safely.
In addition to increasing enrollment under the PM Jan Dhan Yojana, the use
of databases from existing programs (MGNREGA rolls, pension schemes, Ujjawala
databases, ration cards, vendor ID card,
licenses) must be explored to deliver cash.
Expansion of MGNREGA can be thought of in different ways - as an increase in the per household entitlement from 100 to 150 days per year, an increase in the programme wages, linking the availability of number of working days to individuals and not households, increasing the number of worksites (e.g. one in each panchayat11) and so on.
All of these entail an increase in the programme budget, by some estimates to at least
I1.75 lakh crores.12
Concomitantly, there is a need for expanding the list of permissible works, hiring more gram rozgar sevaks (employment assistants), simplifying the implementation process and mobilising para- teachers for work application drives. In particular, it has been pointed out that at present, unlike in the past, where workers could directly come to the worksite and enrol, now no one can be employed unless his or her name has been entered in advance in the e-muster rolls. Without assistance, most workers find it difficult to submit work applications.13 To simplify the process, it would be useful to allow workers to enroll at worksites as opposed to entering their names in e-muster rolls in advance. It might also be worth considering the option of a return to cash payment for the duration of the crisis to ensure timely and reliable payment of wages. This is especially relevant given the limited coverage of bank infrastructure in rural areas and the difficulties faced by workers in reaching bank accounts, discussed in earlier chapters.
Another important issue that merits attention pertains to wage rates paid under MGNREGA.
The MGNREGA Act allows for determining wages in two ways. Workers are either paid the state minimum wage for agricultural labourers or the central government notifies separate wage rates for
the government shifted to the second option and MGNREGA wage rates were set separately from minimum wages. And, it is largely the case that programme wages have been set lower than minimum wages of the state. Aggarwal and Paikra (2020) find that wage rates of at least 17 of the 21 major states are lower than the state minimum wage for agriculture and the shortfall is in the range of 33 per cent of the minimum wage. This is the case even after the increase in MGNREGA wages to I202 announced in the PMGKY package in April 2020. In this regard, it is worth revisiting the recommendations of the Mahendra Dev Committee (Ministry of Rural Development 2015) which was constituted by the Central Government to advise on the matter of programme wage revision. The report of the Committee noted that the baseline for wage indexation should be the current minimum wage rate for agricultural labourers, or the current MGNREGA wage rate, whichever is higher.
Finally, as the response to the pandemic has highlighted the importance of decentralised governance, the decentralized nature of the MGNREGA needs to be further strengthened.
This is particularly important in the backdrop of the fact that, over the last few years, financial resources for the programme have been capped.
Consequently, several state governments have begun to implement MGNREGA as a supply-driven scheme, instead of running it like a demand-based guarantee as conceptualized by the Act. As noted in Chapter Seven, the programme allocation stands at I73,000 crore for the current financial year which is only two per cent more than what was actually spent in 2019-20, a normal year (I71,600 crore). This was inadequate even without the second wave, and is all the more so now.
8. Policy recommendations for the short and medium term
PDS and Jan Dhan have a wider penetration in rural areas and MGNREGA only exists in the countryside. Three states have introduced limited urban wage employment programmes since April 2020, to provide informal workers with a safety net during the pandemic. These are Odisha, Himachal Pradesh and Jharkhand. Kerala already had a small functioning programme since 2011 (see Chapter Seven for details). Another proposal for an urban public works programme, called the Decentralised Urban Employment and Training (DUET) scheme has been proposed by Jean Drèze.14 Here we present a brief outline of a possible programme drawing on Basole et al. (2019). We also flag some important issues that arise when we consider the urban labour market (a detailed discussion is outside the scope of this report).15
The UEG proposed in Basole et al. (2019) is a national level, demand-driven, public works programme which provides a statutory right to employment at specified wage rates for a given number of days, with a grievance redressal and social accountability structure similar to MGNREGA. It is targeted towards small and medium-sized towns and aims to provide a legal right to employment while improving the quality of urban infrastructure and services, restoring urban commons and ecology, skilling youth, and increasing the financial and human capacity of Urban Local Bodies. In addition to 100 days of employment on traditional public works projects, a large variety of works that require a range of education and skills are proposed. These include building and maintenance of roads, footpaths, and bridges;
creation, rejuvenation, and monitoring of urban commons like water bodies, forest land, wetlands,
and parks; provisioning of care for children and the elderly; and monitoring, evaluation, and surveying of environmental quality as well as apprenticeship in municipal offices, public schools, and health centres. The last two types of work are specifically proposed for educated youth to gain skills and real- world experience in the form of 150 contiguous days of training and apprenticeship. The relevant Urban Local Body (ULB), such as the Nagar Panchayat, Municipal Council, or Municipal Corporation is envisioned to be the principal authority responsible for administering this programme. This involves identifying projects, preparing annual works plans and implementing the programme in a participatory manner by involving the ward committees and ward sabhas. The programme needs a set of dedicated staff starting from the level of the Ward.
The disproportionately high impact that the Covid crisis has had on the livelihoods and earnings of the urban poor prompted the civil society group People’s Action for Employment Guarantee (PAEG) to undertake a public campaign for the introduction of a UEG. A few key issues that have arisen during the consultations are:
• Eligibility criteria for workers to be a part of the programme: should the programme be open to migrant workers or only local urban residents?
• Coverage of the UEG in terms of geography:
should it be limited to smaller towns where underemployment is more likely to be a problem than the metros?
• Nature of works: Can the types of works be expanded taking into account the more diversified nature of the urban economy?
• Role of Urban Local Bodies: unlike Panchayati Raj Institutions, the ULB system is not as responsive to local needs. Ward committees often do not exist and municipal elections do not command the attention that panchayat elections in villages do.
MGNREGA allocation stands at I 73,000 crore for 2021-22, only two per cent more than what
was actually spent in 2019-20, a normal year.
This was inadequate even without the second
wave, and all the more so now.
• Role of private contractors: public works in most towns and cities are undertaken via private contractors. ULBs rarely have the capacity to undertake works on their own. MGNREGA prohibits contractors from operating, but is this feasible in the urban programme?
Given the complexity of the above issues, it is worth considering the introduction of a pilot programme where these can be worked through.
A programme could be started in a phased manner with the worst affected urban districts. It could also be envisioned as a programme for women workers only. If, eventually, around half of all urban casual workers across the country are covered, we estimate that a programme offering a wage of I275 per day and 100 days per year of work would cost around I54,000 crores.